Ravindra was in a hurry to buy a used car. His daughter was about to join college and he wanted to ensure her comfort and safety. He decided to avail a used car loan to finance the purchase of a pre-owned car. However, just when he was about to apply for the loan, his friend, Avinash, intervened and asked him not to commit the same mistakes as he did. What mistakes did Avinash make? Here are some of the most common errors that most people make.
Lack of Research
One of the biggest mistakes people make when getting loans for used cars is not researching the loans thoroughly. There are multiple banks and financial institutions that provide used car loans. Different companies have different loan and EMI options and repayment policies. Researching the many available used car loan options can help people find the perfect fit for their requirements. This means there is less chance of you being financially burdened in the future.
Making A Hasty Decision
Another thing that Avinash mentioned, that he himself fell prey to, was making a hasty decision. All financial matters should be carried out carefully. When it comes to anything finance-related, you should take everything into perspective, and consider every option before deciding. This is because both, short terms and long-term goals can be affected by a financial error. A loan option that seems lucrative at first may have hidden features that can be overlooked in the haste of getting the loan.
Failing to Calculate Affordable EMI
Banks and financial institutions usually have calculators that allow customers to calculate the EMI amount before taking up a loan. This enables customers to figure out whether they can afford the loan or not. In some cases, lending institutions also offer different EMI schemes to make repayment easier. For example, Tata Capital offers flexible EMI options like Step Up and Step Down. Customers can either choose to repay smaller amounts of the loan initially and gradually increase the amount every year. Or they can repay larger amounts at the beginning and slowly reduce it in the later years. This helps customers repay a used car loan in a manner that is ideal for them.
Avinash also told Ravindra that banks and financial institutions that loans can be customised as per a customer’s convenience. He said that Tata Capital provides used car loans at competitive interest rates that can be availed for a period of 12 to 60 months. This helps the customer to adjust the interest rate and loan tenure to facilitate their needs and optimally utilise their financial conditions.
Loan Repayment Options
Additionally, some loans also have customisable repayment and prepayment options such as Bullet Payment, wherein the customers can prepay a part of their loans at pre-decided periodic intervals. The Balloon EMI option allows customers to repay the loan with low EMIs in the beginning and pay a larger amount in the last EMI.
Incomplete Knowledge of Loan Policies
Finally, Avinash told Ravindra that while most people feel that getting used car loans from their bank seems like the best option, it is important to read and check the offer before signing the document. Incomplete knowledge of the loan policies may result in confusion, which can eventually affect overall finances. So, find out the exact amount that will be provided by the bank or NBFC, how much down payment will be needed, documents required for the loan and most importantly, the EMI that will be calculated from your monthly income.
Equipped with all this information, Ravindra was able to make a better decision when searching and applying for a used car loan, which helped him in the long run.